HSBC 2009 Annual Report Download - page 156

HSBC HOLDINGS PLC
Report of the Directors: Impact of Market Turmoil (continued)
Overview of exposure > Financial effect / ABSs classified as available for sale
154
Financial effect of market turmoil
As described in ‘Background and disclosure policy’
on page 151, the dislocation of financial markets
which developed in the second half of 2007
continued throughout 2008 and into 2009. For the
last four half-year periods, the write-downs incurred
by the Group on ABSs, trading loans held for
securitisation, leveraged finance transactions and
The Group’s write-downs as a consequence
of market turmoil were US$1.9 billion in
2009, down from US$6.3 billion in 2008.
the movement in fair values on available-for-sale
ABSs taken to equity, plus impairment losses on
specific exposures to banks, are summarised in the
following table:
Financial effect of market turmoil on HSBC
Half-year to
31 Dec
2009
30 Jun
2009
31 Dec
2008
30 Jun
2008
US$bn US$bn US$bn US$bn
Write-downs taken to income statement ......................................................... (0.6) (1.3) (2.3) (4.0)
Net movement on available-for-sale reserve on ABSs in the period .............. 5.3 1.2 (10.4) (6.1)
Closing balance of available-for-sale reserve relating to ABSs ..................... (12.2) (17.5) (18.7) (8.3)
Virtually all of these were recorded in Global
Banking and Markets. During 2009, no further
impairment losses were recognised on the collapse
of financial institutions as the coordinated actions
taken by governments and central banks acted to
stabilise market conditions (2008: US$209 million,
of which the collapse of Icelandic banks accounted
for US$126 million).
Further analyses of the write-downs taken to the
income statement by Global Banking and Markets
and the net carrying amounts of the positions that
generated these write-downs, are shown in the
following table:
Global Banking and Markets write-downs/(write-backs) taken to the income statement and carrying amounts
Write-downs/(write-backs) during half-year to Carrying amount at
31 Dec
2009
30 Jun
2009
31 Dec
2008
30 Jun
2008
31 Dec
2009
30 Jun
2009
31 Dec
2008
30 Jun
2008
US$m US$m US$m US$m US$m US$m US$m US$m
Sub-prime mortgage-related assets
– loan securitisation .......................... 80 156 292 301 758 943 1,213 1,565
– credit trading ................................. 17 83 150 665 282 303 428 1,377
Other ABSs ........................................... (196) 103 486 1,327 990 1,376 2,201 8,923
Impairments on reclassified assets4 ...... 3 160 26 – 15,612 16,308 16,649 –
Derivative exposure to monolines
– investment grade counterparts ...... (78) 25 130 598 897 1,593 2,089 1,206
– non-investment grade counterparts 45 241 370 608 408 510 352 78
Leveraged finance loans5 ...................... (120) (11) – 278 196 285 271 7,375
Other credit related items ..................... (19) 5 95 99 61 116 186 321
Available-for-sale impairments and
other non-trading related items ........ 833 564 655 55
565 1,326 2,204 3,931
For footnotes, see page 195.
Asset-backed securities classified as
available for sale
HSBC’s principal holdings of ABSs are in the
Global Banking and Markets’ business through
special purpose entities (‘SPE’s) which were
established from the outset with the benefit of
external investor first loss protection
support, together with positions held directly and by
Solitaire Funding Limited (‘Solitaire’), where HSBC
has first loss risk.
The table below summarises the Group’s
exposure to ABSs which are classified as available
for sale.